02231cam a22002657 4500001000600000003000500006005001700011008004100028100002600069245015100095260006600246490004100312500001700353520107000370530006101440538007201501538003601573690005601609690008501665700002401750710004201774830007601816856003701892856003601929w7849NBER20150303203048.0150303s2000 mau||||fs|||| 000 0 eng d1 aCaballero, Ricardo J.10aCreative Destruction and Developmenth[electronic resource]:bInstitutions, Crises, and Restructuring /cRicardo J. Caballero, Mohamad L. Hammour. aCambridge, Mass.bNational Bureau of Economic Researchc2000.1 aNBER working paper seriesvno. w7849 aAugust 2000.3 aThere is increasing empirical evidence that creative destruction, driven by experimentation and the adoption of new products and processes when investment is sunk, is a core mechanism of development. Obstacles to this process are likely to be obstacles to the progress in standards of living. Generically, underdeveloped and politicized institutions are a major impediment to a well-functioning creative destruction process, and result in sluggish creation, technological sclerosis,' and spurious reallocation. Those ills reflect the macroeconomic consequences of contracting failures in the presence of sunk investments. Recurrent crises are another major obstacle to creative destruction. The common inference that increased liquidations during crises result in increased restructuring is unwarranted. Indications are, to the contrary, that crises freeze the restructuring process and that this is associated with the tight financial-market conditions that follow. This productivity cost of recessions adds to the traditional costs of resource under-utilization. aHardcopy version available to institutional subscribers. aSystem requirements: Adobe [Acrobat] Reader required for PDF files. aMode of access: World Wide Web. 7aE0 - General2Journal of Economic Literature class. 7aJ3 - Wages, Compensation, and Labor Costs2Journal of Economic Literature class.1 aHammour, Mohamad L.2 aNational Bureau of Economic Research. 0aWorking Paper Series (National Bureau of Economic Research)vno. w7849.4 uhttp://www.nber.org/papers/w784941uhttp://dx.doi.org/10.3386/w7849